The financial system is primarily a means by which
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a. |
funds are transferred from savers to borrowers. |
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b. |
money is put into circulation. |
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c. |
the government puts into operation its plans for the economy. |
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d. |
business firms distribute their goods. |
5 points
Question 2
Economists define risk as
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a. |
the difference between the domestic interest rates and foreign interest rates. |
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b. |
the chance that the value of financial assets will change from what you expect. |
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c. |
the ease with which an asset can be exchanged for other assets or for goods and services. |
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d. |
the difference between the return on common stock and the return on corporate bonds. |
5 points
Question 3
Economists define liquidity as
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a. |
the difference between the return on the asset and the return on a long-term U.S. Treasury bond. |
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b. |
the fraction the asset makes up of an investor’s portfolio. |
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c. |
the ease with which an asset can be exchanged for money. |
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d. |
the difference between the total demand for an asset and the total supply of the asset. |
5 points
Question 4
The objectives of the Federal Reserve include:
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a. |
Stable prices (low inflation) |
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b. |
Low unemployment rates |
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c. |
Adequate rates of economic growth |
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d. |
All of the above |
5 points
Question 5
A debt instrument represents
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a. |
an ownership claim by the purchaser on the issuer. |
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b. |
a promise by a borrower to repay principal plus interest to a lender. |
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c. |
an attempt by a borrower in default to restore his or her credit. |
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d. |
a nontaxable asset, owned primarily by large corporations. |
5 points
Question 6
If foreign interest rates rise
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a. |
the demand for domestic currency rises, causing it to appreciate. |
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b. |
the demand for domestic currency falls, causing it to depreciate. |
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c. |
the demand for domestic currency rises, causing it to depreciate. |
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d. |
the demand for domestic currency falls, causing it to appreciate. |
5 points
Question 7
If a commercial bank lends out all of its’ available funds, it risks becoming:
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a. |
Insolvent. |
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b. |
Illiquid. |
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c. |
Unprofitable |
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d. |
Taken over by the FDIC |
5 points
Question 8
Congress created the Federal Reserve System
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a. |
to serve as a lender of last resort. |
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b. |
to process the receipt of taxes received by the Internal Revenue Service. |
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c. |
to regulate the value of the U.S. dollar against foreign currencies. |
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d. |
to provide a source of mortgage loans to the residential housing market. |
5 points
Question 9
Bond prices and interests rates
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a. |
Vary directly |
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b. |
Vary inversely |
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c. |
Are unrelated |
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d. |
Have an unpredictable relationship |
5 points
Question 10
The most frequently used tool of monetary policy is:
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a. |
the Discount Rate |
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b. |
The Federal Funds Rate |
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c. |
Open Market Operations |
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d. |
The Required Reserve Ratio |
5 points
Question 11
If the economy is in recession, then the Federal Reserve would stimulate the national economy by:
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a. |
Selling bonds which increases interest rates |
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b. |
Increasing the Discount Rate |
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c. |
Buying bonds which decreases interest rates |
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d. |
Increasing the Required Reserve Ratio |
5 points
Question 12
The federal government agency that insures customer deposits at commercial banks is
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a. |
The OCC |
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b. |
The Federal Reserve |
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c. |
The FDIC |
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d. |
The OTS |
5 points
Question 13
In addition to the Board of Governors, the Federal Reserve System has how many Regional Banks?
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a. |
4 |
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b. |
8 |
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c. |
10 |
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d. |
12 |
5 points
Question 14
The maximum amount that a commercial can lend is equal to:
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a. |
Total Deposits |
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b. |
Total Reserves |
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c. |
Total Excess Reserves |
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d. |
None of the above |
5 points
Question 15
The major function(s) of money is/are:
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a. |
Medium of Exchange |
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b. |
Unit of Account |
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c. |
Store of Value |
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d. |
All of these are major functions of money |
5 points
Question 16
Which of the following is NOT included in aggregate demand?
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a. |
Demand for goods and services for consumption |
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b. |
Investment in business plant and equipment |
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c. |
Net exports |
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d. |
Investment in Treasury bonds |
5 points
Question 17
A shift of the AD curve
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a. |
to the right is considered expansionary, and a shift to the left is considered contractionary. |
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b. |
to the left is considered expansionary, and a shift to the right is considered contractionary. |
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c. |
to the right or to the left is considered contractionary. |
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d. |
to the right or to the left is considered expansionary. |
5 points
Question 18
The aggregate supply curve represents levels of output that producers are willing to sell at
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a. |
each level of the real interest rate. |
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b. |
each level of real GDP. |
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c. |
each price level. |
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d. |
each inflation rate. |
5 points
Question 19
A central bank may be reluctant to see its currency appreciate because
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a. |
rising prices of imports will contribute to inflation. |
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b. |
falling prices of exports will contribute to inflation. |
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c. |
the country’s goods may become uncompetitive in world markets. |
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d. |
the country’s monetary base will increase. |
5 points
Question 20
Which of the following accurately describes the Fed’s inflation target?
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a. |
It is implicit rather than explicit. |
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b. |
It seeks to maintain an average inflation rate of 2% per year. |
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c. |
It seeks to keep inflation at 2% all the time. |
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d. |
Its goal is to achieve zero inflation. |
